First, we wish everyone a Happy New Year. Fingers crossed, it will be a healthy and peaceful one. Next, we must recap at least some of the housing news that crowded into the last two weeks of 2022.
After remaining stubbornly in the double digits for the past two years, the annual home price growth slid below 10% in October. The S&P CoreLogic Case Shiller national home price index increased by 9.2% in October, down from 10.7% in September, marking its first single-digit year-over-year increase since November 2020. This deceleration coincides with the mortgage rate reaching over 7% that same month for the first time since April 2008. Meanwhile, the Federal Housing Finance Agency, which oversees U.S. mortgage-finance entities Fannie Mae and Freddie Mac, said annual home price growth slowed to 9.8% in October from 11.1% in September, marking that index’s first non-double-digit gain since September 2020.
“As the Federal Reserve moves interest rates higher, mortgage financing becomes more expensive and housing becomes less affordable,” said Craig Lazzara, the managing director of S&P DJI. “Given the continuing prospects for a challenging macroeconomic environment, home prices may well continue to decelerate.”
Existing Home Sales Slide
Meanwhile, existing-home sales declined for the tenth month in a row in November, according to the National Association of Realtors. “In essence, the residential real estate market was frozen in November, resembling the sales activity seen during the COVID-19 economic lockdowns in 2020,” said NAR Chief Economist Lawrence Yun. “The principal factor was the rapid increase in mortgage rates, which hurt housing affordability and reduced incentives for homeowners to list their homes. Plus, available housing inventory remains near historic lows.”
The general housing market cool down is likely to continue into the new year. Pending home sales slid for the sixth consecutive month in November across all four U.S. regions, falling 4.0% in November. Year-over-year, pending transactions dropped by 37.8%.
Nevertheless, some experts remain optimistic as mortgage rates have decreased slightly since their October high and new home sales rose 5.8% in November. “There are approximately two months of lag time between mortgage rates and home sales. With mortgage rates falling throughout December, home-buying activity should inevitably rebound in the coming months and help economic growth,” added Yun.
We’ll keep you updated on further developments. In the meantime, if you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
